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It's a first for Canada's charity watchdog. Until now, it has failed to deliver clear-cut rules on fundraising for the country's 82,000 charities. Now it has, complete with a list of dodgy practices that can turn donors off a charity.

Among them, commission schemes that lead to high-pressure tactics (fundraisers only get paid if you donate) and repeated pitches that misrepresent what the charity does and how donor money is spent.

In a written statement to the charity community, the federal regulator, called the Charities Directorate, says the new guidelines explain what types of fundraising "may result in revocation" of the charity's status. Other penalties will include hefty fines and suspension for one year (a chance for the charity to clean up its act).

"The (charity) regulator should be applauded for coming out with this," said Georgina Steinsky-Schwartz, president of Imagine Canada, a group that speaks for charities.

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But Steinsky-Schwartz cautions some charities may have valid reasons for spending more than 35 cents of each dollar on fundraising and hopes the regulator will be flexible. She also said her group is pushing forward with its own ethical standards and hopes the charitable sector will try harder to be "responsible to donors."

"We constantly need to make sure we are behaving ethically as fundraisers and that we are doing it because it is the right thing – not just because the regulator is breathing down our neck," she said.

An ongoing Star investigation, Give and Take, delved into these issues over the past year and prompted action from the government and the charitable sector.

The Charities Directorate is part of the Canada Revenue Agency. The proposed policy is the regulator's first attempt to tell charities what it expects from them on the issue of fundraising. When the policy is finalized – likely by year's end – it will be used by the regulator as a measuring stick during its spot and routine audits. But the policy makes clear its main goal is to show charities what is acceptable conduct. With 82,000 charities, the regulator only has the audit staff to look at about 1,000 per year.

Charities have been asked to send their comments by June.

The proposed rules start with a tough look at fundraising percentages – the cost to raise a dollar.

When charities raise money most incur expenses, but the Star found that some charity campaigns leave 70-90 per cent of the donor dollar with the fundraising company or in-house fundraisers.

The proposed rules say that a 20 per cent fundraising cost is "acceptable" and up to 35 per cent is "generally acceptable."

Spending more than that is generally not acceptable, the rules say. The policy does not tackle administrative costs.

Regulators also want more charities to rely on volunteers. For those who don't or can't, they set out a type of conduct that increases the "risk of unacceptable fundraising."

Among them: hiring fundraising companies that keep most of the gross revenues of a campaign; fundraising materials that make false claims about how much of each donor dollar is going to charity; paying commissions to fundraisers based on the amount or number of donations; and spending more money on fundraising than on the actual good works of the charity.

Rather than paying commissions, the regulator would prefer flat rate contracts.

The Star's investigation revealed bogus charities created around health problems and diseases such as AIDS, cancer and organ donation schemes. In each case, the charities used high-powered fundraising firms that left little or nothing for the cause. In other cases, the Star found legitimate charities that hired fundraisers that took most of the donor dollar. But in annual public reports filed by charities to the regulator the Star found some were calling fundraising "charity."

The directorate's policy paper states charities must record as fundraising expenses all costs related to asking for donations.

Already, the regulator has started publicly disciplining charities and seeking the revocation of some. Before this policy, charities had little guidance. They had to rely on media reports of audits in which charities lost their licence for poor practices. These audits, were rarely made available to charities.

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